The former CEO of a Baltimore Behavioral Health Inc., a substance treatment center, pleaded guilty Tuesday to failing to pay $2.4 million in payroll taxes deducted from employees and diverting more than $50,000 from an employee benefit plan.
William K. Hathaway, 52, faces a maximum of 10 years in prison when he is sentenced in June in U.S. District Court in Baltimore.
Hathaway managed the nonprofit mental health and substance abuse clinic’s financial accounts and employee payroll, according to federal prosecutors. He admitted that from March 2009 through December 2011, he withheld the payroll taxes but spent the money on company expenses, including $2.7 million in salaries for BBH officers, which included his wife, sister and mother, according to prosecutors. Hathaway also authorized payments to a company owned and operated by his mother and stepfather, according to prosecutors.
Hathaway also was a fiduciary for the employee pension plan, responsible for transferring employee contributions and ensuring the company matched contributions, according to prosecutors. He admitted that between September 2009 and April 2010, he diverted the employee contributions to pay company expenses, according to prosecutors.
“As chief executive officer of a … ‘charitable’ organization funded by the government to treat Baltimore drug addicts, William Kristen Hathaway paid lucrative salaries to his family members while cheating the IRS and the employee pension plan,” U.S. Attorney Rod J. Rosenstein said in a statement. “This case highlights the need for close oversight of organizations that receive public funds.”
Prosecutors filed criminal charges against Hathaway on March 3, according to court records. Hathaway is being represented by Douglas R. Miller, an assistant federal public defender. Sentencing is set for June 18.